Decentralized lending platform Aave has successfully raised approximately $160 million to address the $200 million in bad debt resulting from the year's most significant decentralized finance exploit, as reported by Arkham on Saturday. The blockchain analytics platform noted, 'So far, AAVE has raised $160M to cover the bad debt from the Kelp DAO Exploit, at defiunited.eth. The largest contributors, Mantle and AAVE DAO, have together contributed 55,000 ETH, valued at $127M.' Following a $292 million security breach that left the largest DeFi lender facing financial instability, Aave and major crypto firms launched a coordinated recovery effort, DeFi United, to stabilize DeFi markets.
Led by Aave service providers, the initiative aims to restore support for rsETH, the yield-bearing ether derivative token central to the exploit. Aave's founder, Stani Kulecho, has personally contributed 5,000 ETH, approximately $11,730,000, to DeFi United.
The exploit, linked to a KelpDAO integration vulnerability with LayerZero, involved an attacker minting 116,500 unbacked rsETH tokens, impairing Aave's collateral and triggering a $10 billion withdrawal. The bailout effort focuses on stabilizing the system by recapitalizing rsETH and mitigating losses. This year's second-largest exploit occurred in late March, with an attacker draining at least $270 million from the Drift Protocol on Solana by exploiting 'durable nonces.'